Medidata Reports Record Full-Year and Fourth Quarter 2016 Results

Full-year GAAP net income of $29.0 million, or $0.51 per diluted
share, up 120% year-over-year

Adjusted subscription backlog1 of $404
million as of December 31, 2016, up 21% year-over-year

Provides 2017 total revenue guidance of between $538 and $562
million

NEW YORK--(BUSINESS WIRE)--
Medidata
(NASDAQ:MDSO), the leading global provider of cloud-based solutions for
clinical research in life sciences, today announced its financial
results for the fourth quarter and full-year 2016 and provided detailed
financial guidance for the full-year 2017.

"The fourth quarter was the strongest in our history, capping a year of
great execution and giving us great momentum as we enter 2017," said
Tarek Sherif, Medidata's chairman and chief executive officer. "Our
results show that our relentless commitment to innovation and our
flawless execution are driving the commercial success of our platform.
Our dedication to helping transform how healthcare solutions are
developed and delivered is embedded in Medidata's DNA, and is rapidly
being embraced by the world's leading life sciences companies—driving
better research, more personalized medicines and ultimately improved
patient outcomes."

Fourth Quarter 2016 Results

Total revenue for the fourth quarter of 2016 was $124.5 million, an
increase of $25.6 million, or 26%, compared with $98.9 million in the
fourth quarter of 2015. Subscription revenue was $106.0 million, an
increase of $21.3 million, or 25%, compared with the same period last
year.

Professional services revenue for the fourth quarter of 2016 was $18.5
million, an increase of $4.3 million, or 30%, compared with $14.2
million in the fourth quarter of 2015.

GAAP operating income for the quarter was $17.5 million, up 81%,
compared with $9.7 million in the fourth quarter of 2015. Non-GAAP
operating income2 for the fourth quarter of 2016 increased
to $31.9 million, up 35%, compared with $23.6 million a year ago.

GAAP net income for the fourth quarter of 2016 was $10.8 million, or
$0.19 per diluted share, up 59%, compared with $6.8 million, or $0.12
per diluted share, in the fourth quarter of 2015. Adjusted non-GAAP
net income2 for the fourth quarter of 2016 was $19.2
million, or $0.33 per diluted share, up 24%, compared with $15.5
million, or $0.27 per diluted share, in the fourth quarter of 2015.
See the non-GAAP reconciliation included in this release for full
details of the non-GAAP adjustments.

Cash flow from operations was $40.4 million in the fourth quarter of
2016, an increase of $10.0 million, or 33%, compared with $30.4
million a year ago.

Full-Year 2016 Results

Total revenue for the full-year 2016 was $463.4 million, an increase
of $70.9 million, or 18%, compared with $392.5 million in 2015.
Subscription revenue was $394.3 million, an increase of $58.1 million,
or 17%, over 2015.

Professional services revenue for the full-year 2016 was $69.1
million, an increase of $12.8 million, or 23%, compared with $56.3
million in 2015.

GAAP operating income for the full-year 2016 was $50.2 million, up
72%, compared with $29.2 million in 2015. Non-GAAP operating income2
for the full year increased to $106.7 million, up 20%, compared with
$89.0 million in 2015.

GAAP net income for the full-year 2016 was $29.0 million, or $0.51 per
diluted share, up 120%, compared with $13.2 million, or $0.23 per
diluted share, in 2015. Adjusted non-GAAP net income2 for
the full year was $62.8 million, or $1.10 per diluted share, up 24%,
compared with $50.8 million, or $0.90 per diluted share, in 2015. See
the non-GAAP reconciliation included in this release for full details
of the non-GAAP adjustments.

Cash flow from operations was $88.8 million for the full-year 2016
compared with $88.6 million in 2015.

Total cash, cash equivalents and marketable securities were $515.2
million at the end of 2016, an increase of $36.5 million, or 8%,
compared with $478.7 million on December 31, 2015.

Additional Highlights

Adjusted subscription backlog1 as of December 31, 2016 was
$404 million, an increase of $70 million, or 21%, compared with $334
million a year ago. Adjusted subscription backlog, together with
professional services revenue guidance, provides 87% coverage of total
revenue based on the midpoint of our full-year 2017 total revenue
guidance range.

In 2016, Medidata closed enterprise platform deals with multiple
top-25 pharmaceutical companies, including Bristol-Myers Squibb and
Celgene. This continued adoption of the Medidata Clinical Cloud®
further reinforces that it is the technology platform of choice for
top life sciences companies looking to transform their drug
development programs, and positions Medidata for long-term future
growth.

In February 2017, Medidata announced that it is adding regulated
document and content management capabilities to the Medidata Clinical
Cloud. Medidata is acquiring CHITA and partnering with Box to create
the industry's first integrated, end-to-end platform for all R&D
content and data management.

Medidata saw significant acceleration in its data analytics business
with 16 deals signed in 2016, showing particular strength in
Centralized Statistical Analytics (CSA), which was adopted by
Bristol-Myers Squibb and Celgene.

Medidata Payments®—the market's only end-to-end, global
payment solution to trigger, calculate and disburse payments around
the globe—was recognized as the "Best Technological Development in
Clinical Trials" at the 2016 Scrip Awards.

Medidata added a record 288 new clients in 2016, an increase of 43%
over 2015, including 66 new clients in the fourth quarter. Medidata's
client base grew to 849 by the end of the year, up 39% from the end of
2015.

79% of clients3 had committed to multiple products at the
end of 2016, up from 67% at the end of 2015.

Total revenue between $538 and $562 million, representing up to 21%
year-over-year growth at constant currency.

Professional services revenues of approximately $75 million.

GAAP operating income between $61 and $69 million. Non-GAAP operating
income, which excludes the impact of depreciation, amortization of
intangible assets, and stock-based compensation expense, between $131
and $139 million.

GAAP net income between $31 and $36 million. Adjusted non-GAAP net
income, which excludes the impact of stock-based compensation,
non-cash interest expense associated with convertible senior notes,
and amortization, tax-affected at a 40% rate, between $69 and $74
million.

While changes in the stock price could change the fully diluted share
count, the Company is now assuming 58.2 million fully diluted shares.

The operating and net income measures above reflect the Company's
non-GAAP financial guidance and the corresponding GAAP equivalents to
its guidance.

Conference Call

The Company plans to host its investor conference call today at 8:00
a.m. Eastern time. The investor conference call will be available via
live webcast on the "Investor" section of Medidata's website at http://investor.mdsol.com.
To participate by telephone, domestic participants may dial 877-303-2528
and international participants may dial 847-829-0023. Those interested
in participating in the conference call should dial in at least 10
minutes prior to the call to register. Participants can also join the
call via a simultaneous live audio webcast, which will be made available
on the "Investor" section of Medidata's website at http://investor.mdsol.com.
A replay of the conference call can be accessed until Thursday, February
23, 2017 by dialing 800-585-8367 domestically or 404-537-3406
internationally, with the passcode 52493043. An archive of the call will
also be hosted on the "Investor" section of Medidata's website, http://investor.mdsol.com,
for a limited period of time.

About Medidata

Medidata
is reinventing global drug development by creating the industry's
leading cloud-based solutions for clinical research. Through our
advanced applications and intelligent data analytics, Medidata helps
advance the scientific goals of life sciences customers worldwide,
including over 800 global pharmaceutical companies, innovative biotech,
diagnostic and device firms, leading academic medical centers, and
contract research organizations.

The Medidata Clinical Cloud® brings a new level of quality
and efficiency to clinical trials that empower our customers to make
more informed decisions earlier and faster. Our unparalleled clinical
trial data assets provide deep insights that pave the way for future
growth. The Medidata Clinical Cloud is the primary technology solution
powering clinical trials for 17 of the world's top 25 global
pharmaceutical companies, from study design and planning through
execution, management and reporting.

Cautionary Statement

Certain statements made in this press release are "forward-looking
statements" within the meaning of the Private Securities Litigation
Reform Act of 1995 that involve significant risks and uncertainties
about Medidata Solutions, Inc. ("Medidata"), including but not limited
to statements about Medidata's forecast of financial performance,
products and services, business model, strategy and growth
opportunities, and competitive position. Such statements are subject to
risks and uncertainties that could cause actual performance or results
to differ materially from those expressed in these statements. In
particular, the risks and uncertainties include, among other things,
risks associated with possible fluctuations in our financial and
operating results; errors, interruptions or delays in our service or our
web hosting; the financial impact of any future acquisitions; our
ability to continue to release, and gain customer acceptance of, new and
improved versions of our products; changes in our sales and
implementation cycles; competition; our ability to retain and expand our
customer base or increase new business from those customers; our ability
to hire, retain and motivate our employees and manage our growth;
regulatory developments; litigation; and general developments in the
economy. For additional disclosure regarding these and other risks faced
by the Company, see disclosures contained in Medidata's public filings
with the Securities and Exchange Commission, including the "Risk
Factors" section of Medidata's Annual Report on Form 10-K for the year
ended December 31, 2015. You should consider these factors in evaluating
the forward-looking statements included in this press release and not
place undue reliance on such statements. The forward-looking statements
are made as of the date hereof, and Medidata undertakes no obligation to
update such statements as a result of new information.

Medidata provides non-GAAP operating income, net income and net
income per share applicable to common stockholders data as additional
information for its operating results. These measures are not in
accordance with, or an alternative for, generally accepted accounting
principles and may be different from non-GAAP measures used by other
companies. Non-GAAP operating income excludes the impact of
depreciation, amortization of intangible assets associated with
acquisitions, and stock-based compensation expense. Adjusted non-GAAP
net income excludes the tax-affected impact of amortization of
intangible assets associated with acquisitions, stock-based compensation
expense, and non-cash interest expense on convertible senior notes.
Management uses these non-GAAP measures to evaluate its financial
results, develop budgets, manage expenditures, and as an important
factor in determining variable compensation. In addition, investors
frequently have requested information from management regarding
depreciation, amortization and other non-cash charges, such as
share-based compensation, and management believes, based on discussions
with investors, that these non-GAAP measures enhance investors' ability
to assess Medidata's historical and projected future financial
performance. While management believes these non-GAAP financial measures
provide useful supplemental information to investors, there are
limitations associated with the use of non-GAAP financial measures. One
limitation of non-GAAP operating income is that it excludes depreciation
and amortization, which represents the periodic costs of certain
capitalized tangible and intangible assets used in generating revenues
in our business. Medidata compensates for these limitations by using
these non-GAAP financial measures as supplements to GAAP financial
measures and by reviewing the reconciliations of the non-GAAP financial
measures to their most comparable GAAP financial measures. Investors are
encouraged to review the reconciliations of these non-GAAP financial
measures to the comparable GAAP results, which are attached to this
press release.

(3) Excludes medical imaging-only customers.

MEDIDATA SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except per share data)

Three Months EndedDecember 31,

Twelve Months EndedDecember 31,

2016

2015

2016

2015

Revenues

(unaudited)

(unaudited)

Subscription

$

105,981

$

84,639

$

394,269

$

336,195

Professional services

18,491

14,230

69,112

56,311

Total revenues

124,472

98,869

463,381

392,506

Cost of revenues (1)(2)

Subscription

16,112

11,479

62,136

47,795

Professional services

13,544

10,429

50,473

41,993

Total cost of revenues

29,656

21,908

112,609

89,788

Gross profit

94,816

76,961

350,772

302,718

Operating costs and expenses:

Research and development (1)

28,072

23,697

112,595

92,319

Sales and marketing (1)(2)

28,434

27,230

109,290

103,153

General and administrative (1)

20,812

16,359

78,678

78,014

Total operating costs and expenses

77,318

67,286

300,563

273,486

Operating income

17,498

9,675

50,209

29,232

Interest and other income (expense):

Interest expense

(4,758

)

(4,199

)

(17,288

)

(16,192

)

Interest income

1,573

914

4,382

2,799

Other income (expense), net

19

1

11

(64

)

Total interest and other expense, net

(3,166

)

(3,284

)

(12,895

)

(13,457

)

Income before income taxes

14,332

6,391

37,314

15,775

Provision for income taxes

3,492

(425

)

8,331

2,608

Net income

$

10,840

$

6,816

$

28,983

$

13,167

Earnings per share:

Basic

$

0.19

$

0.13

$

0.52

$

0.25

Diluted

$

0.19

$

0.12

$

0.51

$

0.23

Weighted average common shares outstanding:

Basic

55,783

54,020

55,492

53,717

Diluted

57,637

56,768

57,249

56,540

(1) Stock-based compensation expense included in cost of revenues
and operating costs and expenses is as follows:

Cost of revenues

$

822

$

1,235

$

4,425

$

5,040

Research and development

2,414

2,003

9,223

7,907

Sales and marketing

1,725

2,001

7,074

9,171

General and administrative

5,042

5,840

20,436

26,869

Total stock-based compensation

$

10,003

$

11,079

$

41,158

$

48,987

(2) Amortization of intangible assets included in costs of revenues
and operating costs and expenses is as follows:

Cost of revenues

$

314

$

79

$

1,021

$

517

Sales and marketing

83

30

276

119

Total amortization of intangible assets

$

397

$

109

$

1,297

$

636

MEDIDATA SOLUTIONS, INC.

Reconciliation of GAAP Operating Income and GAAP Net Income to

Non-GAAP Operating Income and Adjusted Non-GAAP Net Income
(Unaudited)

(Amounts in thousands, except per share data)

Three Months EndedDecember 31,

Twelve Months EndedDecember 31,

2016

2015

2016

2015

Operating income:

GAAP operating income

$

17,498

$

9,675

$

50,209

$

29,232

GAAP operating margins

14.1

%

9.8

%

10.8

%

7.4

%

Stock-based compensation

10,003

11,079

41,158

48,987

Depreciation and amortization

4,448

2,881

15,349

10,822

Non-GAAP operating income

$

31,949

$

23,635

$

106,716

$

89,041

Non-GAAP operating margins

25.7

%

23.9

%

23.0

%

22.7

%

Net income:

GAAP net income

$

10,840

$

6,816

$

28,983

$

13,167

Stock-based compensation

10,003

11,079

41,158

48,987

Amortization

397

109

1,297

636

Non-cash interest expense on convertible senior notes (1)

3,550

3,363

13,914

13,180

Tax impact on add-back items (2)

(5,580

)

(5,820

)

(22,548

)

(25,121

)

Adjusted non-GAAP net income

$

19,210

$

15,547

$

62,804

$

50,849

GAAP basic earnings per share

$

0.19

$

0.13

$

0.52

$

0.25

GAAP diluted earnings per share

$

0.19

$

0.12

$

0.51

$

0.23

Adjusted non-GAAP basic earnings per share

$

0.34

$

0.29

$

1.13

$

0.95

Adjusted non-GAAP diluted earnings per share

$

0.33

$

0.27

$

1.10

$

0.90

(1) Amount represents non-cash interest expense, including
amortization of debt discount and issuance costs, on our 1.00%
convertible senior notes. We exclude this incremental non-cash
interest expense for purposes of calculating adjusted non-GAAP net
income. We believe that excluding these expenses from our non-GAAP
measures is useful to investors because such incremental non-cash
interest expense does not generate a cash outflow for the Company
and the debt issuance costs do not represent a cash outflow for
the Company except in the period the notes were issued; therefore
both are not indicative of our continuing operations.

(2) Tax impact calculated using a 40% tax rate.

The table above presents a reconciliation of GAAP to non-GAAP
operating income, net income, and net income per share applicable
to common stockholders for the three and twelve months ended
December 31, 2016 and 2015. Non-GAAP operating income excludes the
impact of depreciation, amortization of intangible assets
associated with acquisitions, and stock-based compensation
expense. Adjusted non-GAAP net income excludes the impact of tax
affected amortization of intangible assets associated with
acquisitions, stock-based compensation expense, and non-cash
interest expense on convertible senior notes.

MEDIDATA SOLUTIONS, INC.

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except per share data)

December 31, 2016

December 31, 2015

ASSETS

(unaudited)

Current assets:

Cash and cash equivalents

$

93,519

$

49,562

Marketable securities

281,285

220,126

Accounts receivable, net of allowance for doubtful accounts of
$1,041 and $1,992, respectively

Adjustments to reconcile net income to net cash provided by
operating activities:

Depreciation and amortization

15,349

10,822

Stock-based compensation

41,158

48,987

Amortization of discounts or premiums on marketable securities

2,757

4,754

Deferred income taxes

5,895

(3,209

)

Amortization of debt issuance costs

1,278

1,278

Amortization of debt discount

12,636

11,902

Provision for doubtful accounts

1,116

597

Loss on fixed asset disposal

3

—

Changes in operating assets and liabilities:

Accounts receivable

(25,172

)

(34,513

)

Prepaid commission expense

(2,108

)

439

Prepaid expenses and other current assets

185

(9,058

)

Other assets

(8,735

)

2,715

Accounts payable

2,825

(502

)

Accrued payroll and other compensation

7,343

6,014

Accrued expenses and other

14,220

712

Deferred revenue

(1,050

)

28,617

Other long-term liabilities

(7,914

)

5,872

Net cash provided by operating activities

88,769

88,594

(1

)

Cash flows from investing activities:

Purchase of furniture, fixtures and equipment (2)

(25,656

)

(19,017

)

Purchase of available-for-sale marketable securities

(266,361

)

(264,113

)

Proceeds from sale of available-for-sale marketable securities

271,796

246,423

Purchase of cost method investment

(4,000

)

—

Acquisition of business, net of cash acquired

(17,186

)

—

Net decrease (increase) in restricted cash

149

(791

)

Net cash used in investing activities

(41,258

)

(37,498

)

Cash flows from financing activities:

Proceeds from exercise of stock options

5,495

6,686

Proceeds from employee stock purchase plan

6,864

6,009

Repayment of obligations under capital leases

—

(46

)

Acquisition of treasury stock

(15,570

)

(53,582

)

Repayment of notes payable

(100

)

(62

)

Net cash used in financing activities

(3,311

)

(40,995

)

(1

)

Effect of exchange rate changes on cash and cash equivalents

(243

)

(56

)

Net increase in cash and cash equivalents

43,957

10,045

Cash and cash equivalents - Beginning of period

49,562

39,517

Cash and cash equivalents - End of period

$

93,519

$

49,562

(1) As a result of the Company's early adoption of Accounting
Standards Update No. 2016-09, which requires excess tax benefit on
equity awards to be presented as an operating activity, the
consolidated statement of cash flows for the twelve months ended
December 31, 2015 has been adjusted to reflect an offsetting
increase of $1,622 thousand to net cash provided by operating
activities and net cash used in financing activities.

(2) Purchases of furniture, fixtures and equipment include
capitalized software development and implementation costs of
$3,262 thousand and $954 thousand for the twelve months ended
December 31, 2016 and 2015, respectively.